Apple May Have Saved Sharp with $2 Billion Investment

Sharp recently warned investors that it was on the verge of collapse after doubling its full-year net loss forecast to $5.6 billion, citing a "worse than expected drop" in LCD TV sales in Japan and China. At the time, it was being reported that Sharp was looking for outside help to stay afloat, and was in talks with Hon Hai Precision (Foxconn) to become the company's largest shareholder. Did Apple beat them to the punch?

Horace Dediu, an analyst with Asymco, took note of some interesting financial happenings at Apple, including the fact that expenditures overall were $2.3 billion higher than forecast. Dediu also pointed to Apple paying for some of its acquisitions "through uncharacteristic or unorthodox means."

Image Source: Sharp

That's a significant amount of over-spending, and Apple chalked it up to "product tooling, manufacturing process equipment, and infrastructure," Dediu said. According to his numbers, Apple overspent in 2012 more than it spent overall two years earlier. His theory is that at least some of that money went to Sharp.

"Circumstantial evidence points to the asset being production equipment (or even a whole plant) previously owned by Sharp," Dediu said. "Sharp is a key supplier of screens to Apple but is also in financial distress. Sharp has also been the object of an intended investment by Foxconn [Hon Hai]. That deal fell through as Sharp’s finances deteriorated. My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier)."

Dediu notes that if Sharp were to enter into bankruptcy, it's possible that its plants could be seized by creditors and taken offline, regardless of any contract obligations it has with Apple.